World Economy

Turkey Extends Corporation Tax Hike to All Firms

Turkey Extends Corporation Tax Hike to All FirmsTurkey Extends Corporation Tax Hike to All Firms

A Turkish parliamentary commission agreed to extend a planned 2 percentage point tax rise to all corporations instead of just financial institutions.

Friday’s proposal was one of several changes to tax plans which aim to address a public backlash against proposals put forward last month while still allowing expenditure to grow. The government is seeking more revenues for military spending, Reuters reported.

The commission accepted a proposal from President Recep Tayyip Erdogan to trim a planned hike in motor vehicle tax to 15-25% for most cars, depending on engine size, from the 40% put forward in a draft law.

Agreement was also reached to drop a proposed increase in one income tax bracket to 30% from 27% as of 2018. But offsetting those concessions, a separate additional tax on cars, linked to their value, will come into effect next year.

Owners of cars valued between 40,000 to 70,000 Turkish lira ($11,000-$19,000) will pay an additional 10%, while cars valued above that will face a 20% increase in motor vehicle tax, Finance Minister Naci Agbal said.

The rise in corporation tax, to 22% from 20%, will run for the next three years, a copy of the proposal handed to parliament showed on Friday. The proposals still need to be passed by the parliament, but are unlikely to face serious opposition in a chamber where Erdogan’s AK Party holds a majority of seats.

Earlier on Friday, Deputy Prime Minister Mehmet Simsek said on Twitter that Turkey would maintain its medium-term economic program targets and that the loss of revenue from the reduced motor vehicle tax hike would be recouped elsewhere.

“Medium term program and budget targets will remain unchanged. We will take measures to compensate for the changes in tax hikes,” Simsek wrote on Twitter.

The proposed tax increases aim to help cover a rise in military spending. Simsek said last week that an additional $5 billion will be spent to buy new weapons next year relying on tax revenues, not borrowing.

As of September, number of taxpayers in Turkey increased by 3.27% compared to same period last year, with a little over 10.5 million. Istanbul has maintained its leadership with number of taxpayers exceeding 3 million.

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